Montenegro: Changes Personal Income Tax, Social Security Rules
On 17 December 2009, the Parliament of Montenegro adopted amendments to the Personal Income Tax Law and the Law on Mandatory Social Security Insurance Contributions, which are applicable as of 1 January 2010.
Personal Income Tax Law Amendments
Amendments to the Personal Income Tax Law have reduced the range of non-taxable income items and tax rates have been harmonized at the level of 9 percent (except interest income paid to nonresidents, where the tax rate has been kept at the level of 5 percent).
The amendments stipulate the following:
• Vacation allowance, meal allowance, and compensation for commuting costs are no longer exempt from personal income tax and are taxable at a general rate of 9 percent.
• Personal allowance for residents in the amount of € 840 per annum (€70 per month) has been abolished.
• Pensions received by state and public servants are subject to tax, while other pensions remain exempt from tax.
• Final withholding tax rate on royalties and rental income (if the payer is a legal entity) has been reduced from 15 percent to 9 percent.
• Lump-sum deductible expenses for income from independent activities and income from real estate and royalties have been reduced from 40 percent to 30 percent.
• The form, content, and procedure for issuing certificates of residency for tax purposes are now prescribed by the Ministry of Finance.
In addition, capital gains have been introduced again as income subject to tax at the rate of 9 percent. Capital gain or loss is defined as the income or loss arising from the sale of: immovable property, stakes in a limited liability company, and securities. This provision will apply as of 1 January 2011.
Law on Mandatory Social Security Insurance Contributions
Amendments to the Law on Mandatory Social Security Insurance Contributions introduce new social security insurance contribution rates for pension and disability and health insurance which are applicable as of 1 January 2010.
Below is a breakdown with rates applicable in 2009, as well as rates applied from 1 January 2010.